The mission of the International Monetary Fund (IMF), whose positive conclusions will start work on a new program with it, is expected to begin work in Ukraine next week, said the head of the National Bank of Ukraine, Andriy Pyshny.
“We expect the start of the IMF mission as early as next week. We hope to reach agreements on macroeconomic indicators, parameters of the state budget for 2023 and sources of covering its deficit, which will be the beginning of work on a new program with the Fund,” the press service of the National Bank quoted him as saying. .
Pyshny also thanked the IMF for providing $1.3 billion in additional emergency financing under the RFI instrument, which arrived in Ukraine on Thursday.
As reported, on the eve of the IMF Managing Director Kristalina Georgieva said that the Fund’s team, together with the Ukrainian team, immediately after the annual meeting of the IMF and the World Bank (WB) this week, will determine Ukraine’s macroeconomic framework and budget.
In addition, US Treasury Secretary Janet Yellen noted that a new full-fledged IMF program for Ukraine could be early next year.
Finance Minister Serhiy Marchenko said the government estimates the need to finance the state budget deficit in 2023 at $3.5 billion a month, compared to $5 billion a month in 2022, which Ukraine has so far failed to raise. The best indicator was August with $4.6 billion, and in general, since the beginning of the war, or almost eight months, external funding amounted to $20.7 billion, of which almost 50% were grant funds.
The draft state budget of Ukraine for 2023, which was adopted in the first reading, provides for external financing of the deficit in the amount of $38 billion, or about $3.2 billion per month.
Ukraine has received $1.3 billion in additional emergency financing from the International Monetary Fund (IMF), Prime Minister Denys Shmyhal has said.
“$1.3 billion of additional emergency financing from the International Monetary Fund has arrived in Ukraine. The funds will be used to finance priority needs: strengthening defense capabilities, paying pensions, social programs and supporting the economy,” Shmyhal wrote on his Telegram channel on Thursday.
According to him, in general, since the beginning of the full-scale war, the IMF has provided Ukraine with $2.7 billion.
“Also, in the near future, we will start preparing a new special program with the Fund, which will start working next year. We thank our partners and allies for their unwavering support,” the prime minister said.
Difficult year awaits Ukraine in 2023: the public finance deficit is estimated at $3-4 billion, it is necessary to ensure the stability of the economy, and the IMF will provide support: an international forum will be convened in the near future to solve this problem, said the Managing Director of the International Monetary Fund Kristalina Georgieva.
“We need to learn how to ensure the sustainability of the economy. According to our preliminary estimates, three to four billion dollars are needed monthly,” she said at the second meeting of the “round table” of ministers to support Ukraine as part of the annual meeting of the IMF and the World Bank in Washington in Wednesday.
Responding to the call of the President of Ukraine Volodymyr Zelensky to organize an economic forum, which meets on a regular basis, and considers the macro-situation in the country, the lack of funding and solves the problem of its reduction, Georgieva said that such work is already underway.
“We will convene the forum as soon as possible,” the head of the IMF said.
She also noted that the Fund has a new platform for interaction, allowing for monitoring jointly with the board of directors, which is the way to a full-fledged program for Ukraine, which Zelensky called for.
“We are moving with you in the direction of a strong Ukraine,” Georgieva stressed.
US Treasury Secretary Janet Yellen noted that a new IMF program for Ukraine could be early next year.
Georgieva clarified that the Fund’s team, together with the Ukrainian team, immediately after the annual meeting of the IMF and the WB, will determine the macroeconomic framework and budget of Ukraine.
She expressed her hope that the war would end sooner rather than later. “But judging by what we see, we should be close to the Ukrainian people,” the head of the IMF said.
She recalled that Ukraine’s international partners have already mobilized $35 billion, a significant part of which has already been transferred, and called for further support, especially in the form of grants.
According to Georgieva, further needs will be determined, firstly, by the cost of social services, which depends on war and migration, and secondly, the cost of restoring vital infrastructure, which also depends on war and on prioritization.
“And thirdly, what are the energy needs of the country, how much needs to be imported to provide for people in Ukraine, and this depends, of course, on the horrors of war,” the managing director added.
She noted that the senseless war of Russia against Ukraine has sharply worsened the prospects for the global economy and brought the most dramatic consequences for the people of Ukraine.
As reported earlier, Finance Minister Sergei Marchenko said that the government estimates the need to finance the state budget deficit in 2023 at $3.5 billion per month.
The first meeting of such a “round table” was held at the spring meeting of the IMF and WB on April 21. It announced Ukraine’s monthly need of $5 billion to finance the state budget deficit in the context of the war unleashed by Russia.
The draft state budget of Ukraine for 2023, which was adopted in the first reading, provides for external financing of the deficit in the amount of $38 billion, or about $3.2 billion per month.
The International Monetary Fund (IMF) left unchanged its July forecast for global economic growth in 2022 – 3.2% (in January, an increase of 4.4% was expected, in April – by 3.6%). For 2023, the estimate is lowered to 2.7% from 2.9% in July and 3.6% in April (in January, the IMF predicted global GDP growth of 3.8%).
“The global economy continues to face serious challenges caused by the lingering impact of three powerful forces: the Russian invasion of Ukraine, the “cost of living crisis” caused by persistent and increasing inflationary pressures, and the slowdown in China. (…) GDP of countries representing more than a third of the world economy will contract in 2023, while the three largest economies – the US, the European Union and China – will continue to slip. In short, the worst is yet to come, and for many, 2023 will feel like a recession,” the report says.
Russia’s war against Ukraine has triggered an energy crisis in Europe that is drastically increasing the cost of living and hindering economic activity, the IMF writes. “Gas prices in Europe have more than quadrupled since 2021, with Russia cutting deliveries to less than 20% of 2021 levels, raising the possibility of power shortages next winter and beyond. More broadly, the war has also pushed up food prices on world markets, despite the recent decline in prices following the Black Sea grain deal, which has caused severe hardship for low-income families around the world, especially in low-income countries.
The report also notes that sustained and rising inflationary pressures have caused a rapid and synchronized tightening of monetary conditions, along with strong dollar appreciation against most other currencies. “Tighter global monetary and financial conditions will affect the economy, reducing demand and helping to gradually curb inflation. However, so far, price pressures remain quite persistent and are of great concern to policymakers. We expect global inflation to peak at the end of 2022, but will remain high for longer than previously expected, falling to 4.1% by 2024.
COUNTRY ASSESSMENTS
The IMF insignificantly, but still improved its forecast for the growth of the economies of emerging markets and developing countries for 2022 – to 3.7% from 3.6% (in April it expected 3.8%), for 2023 – lowered to 3. 7% from 3.9% (April – 4.4%).
The growth forecast for the Chinese economy this year has been worsened to 3.2% from 3.3% (in April, an increase of 4.4% was expected, in January – by 4.8%), in 2023 – to 4.4% from 4 .6% (April estimate – 5.1%).
India’s GDP growth estimate has also been reduced to 6.8% from 7.4% (April – 8.2%) in 2022, and remained unchanged for 2023 – 6.1% (April – 6.9%).
At the same time, the growth forecast for the Brazilian economy has been significantly increased for 2022 – up to 2.8% from 1.7% in July and 0.8% in April, for 2023 it has also been increased – up to 1% from up to 0.9% (April forecast – 1.4%).
The estimate of GDP growth in developed countries in 2022 is worsened by 0.1 percentage points – up to 2.4% (April – 3.5%) and by 0.3 percentage points. – up to 1.1% – in 2023 (2.4% – April estimate).
The IMF continued to reduce the forecast for US GDP growth in 2022 – by 0.7 percentage points. to 1.6% (April – 3.7%). The following year, the estimate remained the same – 1% (April – 2.3%).
The economy of the eurozone countries this year, according to the IMF, will grow by 3.1%, the forecast has been improved from 2.6% in July and 2.8% in April). For 2023, the estimate is downgraded by 0.7 p.p. – up to 0.5% (April – 2.3%).
Italy’s 2022 GDP growth forecast has been raised to 3.2% from 3% in July and 2.3% in April. In 2023, the IMF expects the economy to decline by 0.2%, in July it predicted an increase of 0.7%, in April – by 1.7%.
The German economy in 2022 will grow, according to the IMF, only by 1.5% (better than the July forecast – 1.2%). At the same time, in 2023, the economy is expected to decline by 0.3% (in July, an increase of 0.8% was expected, in April – by 2.7%).
The forecast for Spain for the current year has been raised to 4.3% from 4% (in April – 4.8%) and lowered to 1.2% from 2% in 2023.
For France, the estimate for the current year has been improved to 2.5% from 2.3% and by 0.4 percentage points, for 2023 it has been worsened to 0.7% from 1%.
The growth forecast for the UK economy for 2022 has been improved to 3.6% from 3.2%, for 2023 it has been worsened to 0.3% from 0.5%. Japan’s GDP growth estimate for the current year remained at the level of 1.7%, for 2023 it decreased to 1.6% from 1.7%.
President of Ukraine Volodymyr Zelensky has welcomed the decision of the International Monetary Fund (IMF) to provide Ukraine with a $1.3 billion tranche.
“The Executive Board of the IMF has just supported the provision of about $1.3 billion to Ukraine under the Rapid Financing Instrument. The money will go to Ukraine today. Thanks Kristalina Georgieva and the IMF Executive Board for the support!” he said on Twitter on Friday.
In turn, Ukrainian Prime Minister Denys Shmyhal also said that the IMF will provide Ukraine with additional $1.3 billion.
“This means that the financing from the Fund since the beginning of the war will total $2.7 billion. The tranche will be directed at the support for our defense capacity, payment of pensions and social programs, as well as our economic resilience,” he said on the Telegram channel.
Ukraine’s international partners have provided it with around $20 billion since the beginning of the full-scale war. Thanks to this assistance “we understand how we can finance all necessary expenditures this year,” the PM said.
“We are expecting a new large IMF program next year, as well as financing from the U.S., the EU and other G7 Member States,” Shmyhal said.
The Executive Board of the International Monetary Fund (IMF) has approved $1.3 billion in emergency financial support for Ukraine under the new Rapid Financing Instrument (RFI) food shock window to meet Ukraine’s urgent balance of payments needs.
“More than seven months after the start of the Russian invasion of Ukraine, humanitarian and economic losses remain enormous, leading to large and urgent fiscal and external financing needs,” the IMF said on its website on Saturday night.
The IMF points out that the scale and intensity of Russia’s war against Ukraine, which began more than seven months ago, has caused enormous human suffering and economic damage. With massive population displacement and destruction of housing and basic infrastructure, Ukraine’s real GDP is projected to contract by 35% in 2022 compared to 2021, and financing needs remain very large.
“This RFI payment (equivalent to 50% of Ukraine’s IMF quota) will help meet the urgent needs of the balance of payments, including due to a large reduction in grain exports, and will also play the role of a catalyst for further financial support from Ukraine’s creditors and donors,” the Fund stressed.
The IMF noted that the Ukrainian authorities are to be commended for maintaining largely macro-financial stability in these extremely challenging circumstances and have requested board-level monitoring of the program to bolster their policy commitment and further galvanize donor support.
